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Court of AppealPartially AllowedCivil Appeal No. 115 of 2016· [2017] KECA 527 (KLR)

Kenya Power & Lighting Co Ltd v Abdulhakim Abdulla Mohamed & another [2017] KECA 527 (KLR)

Court of Appeal of Kenya
11 May 2017
ASAsike-MakhandiaWilliam OukoW. OukoKMK. M'inoti
3,088 words in judgment
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The bottom line

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Kenya's Court of Appeal ruled judges cannot demand huge cash deposits before hearing a defendant's case when the defence raises genuine triable issues.

What this practically means

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Executive summary

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The Court of Appeal at Mombasa (Makhandia, Ouko and M'inoti, JJ.A) allowed an appeal by Kenya Power & Lighting Co Ltd against part of a High Court ruling (Otieno, J) of 7th December 2016. The High Court had set aside a default judgment of Kshs 522,713,576 entered against the appellant following a fire at the respondents' warehouses, but on condition that the appellant deposit the entire claimed sum in an interest earning account within 21 days, failing which the setting aside would stand vacated. The appellant contended the condition was an onerous and erroneous exercise of discretion inconsistent with the finding that its mistake was excusable, its defence raised triable issues, and it had not intended to delay justice. The Court agreed that the discretion under Order 10 rule 11 is wide and unfettered but must be exercised judiciously, with the overriding consideration being to do justice to both parties where triable issues exist and there is no deliberate overreach. It found the only stated reasons for the deposit order - assuaging the respondents and motivating expedition - were not relevant considerations, especially since thrown away costs of Kshs 100,000 had already been awarded and the respondents could not access the deposited money until proving their claim. Applying the United India Insurance standard for appellate interference with discretion, the Court held the order vitiated by serious misdirection, irrelevant considerations and omitted relevant matters, set aside the deposit condition, and awarded the appellant the costs of the appeal. The remainder of the ruling setting aside the default judgment was not disturbed.

Key legal issues

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01

Whether the condition to deposit the entire claimed sum of Kshs 522,713,576 as a condition for setting aside the default judgment was a proper exercise of discretion

Holding

It was not. The order was vitiated by serious misdirection, taking into account irrelevant factors and failing to take into account relevant matters, and was set aside.

Reasoning

The learned judge had found the mistake excusable, the defence raising triable issues, and no intention to delay justice, yet still ordered deposit of the full disputed sum. The stated purposes - assuaging the respondents and motivating expedition - were not relevant considerations: thrown away costs had already been awarded, the deposit would be inaccessible to the respondents until proof of their claim, and there was no suggestion the appellant would be unable to pay if the claim succeeded at trial. The order did not advance the just, proportionate and affordable resolution of disputes under the overriding objective.

p. 5
02

The applicable standard for interference by the Court of Appeal with a discretionary decision of the High Court

Holding

The Court will not interfere merely because it would have exercised the discretion differently; interference lies only on the established grounds of misdirection, misapprehension of facts, irrelevant considerations, omitted relevant considerations, or a plainly wrong decision.

Reasoning

Adopting the classic formulation of Madan, JA in United India Insurance Co Ltd v East African Underwriters (K) Ltd, the court reiterated that appellate interference with discretion requires establishment of one of the enumerated misdirection grounds. Applying that standard, the court found the deposit condition vitiated by serious misdirection and therefore interfered.

p. 5

Legal principles established

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  • The discretion to set aside a default judgment is wide and unfettered but must be exercised judiciously and upon reason, not arbitrarily or capriciously
  • Where a default judgment is to be set aside on the basis of a defence raising triable issues and absent deliberate overreach, delay or obstruction, the overriding consideration is to do justice to both parties, and onerous deposit conditions should not be imposed
  • The Court of Appeal will interfere with a discretionary decision of the High Court only on the established grounds of misdirection in law, misapprehension of facts, taking into account irrelevant considerations, failing to take account of relevant considerations, or where the decision is plainly wrong

Court orders

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  1. 1.The appeal is allowed
  2. 2.The part of the order dated 7th December 2016 requiring the appellant to deposit Kshs 522,713,576 in an interest earning account in the names of the parties' advocates is set aside
  3. 3.The appellant shall have costs of the appeal

Authorities

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Legislation

  • Constitution of KenyaArticle 50
  • Constitution of KenyaArticle 159(2)(a)
  • Civil Procedure ActSections 1A and 1B
  • Civil Procedure RulesOrder 10 rule 6
  • Civil Procedure RulesOrder 10 rule 9
  • Civil Procedure RulesOrder 10 rule 11

Cases cited (10)

  • Patel v East Africa Cargo Handling Services
    [1974] EA 75
  • Sebei District Administration v Gasyali & Others
    [1968] EA 300
  • Philip Keipto Chemwolo & Another v Augustine Kubende
    [1982-1988] KAR 1036
  • Bai Lin (K) Ltd & 2 Others v Zingo Investments Ltd & Another
    CA No. 12 of 2014
  • Shanzu Investments Ltd v Commissioner of Lands
    CA No. 100 of 1983
  • Mbogo & Another v Shah
    [1968] EA 93
  • Consolidated Marine v Nampijja & Another
    CA No. 93 of 1989
  • George Owen Nandy v Ruth Watiri Kibe
    CA No. 39 of 2015
  • Jaribu Holdings v Kenya Commercial Bank Ltd
    CA No. 314 of 2007
  • United India Insurance Co. Ltd v East African Underwriters (K) Ltd
    [1985] E.A 898
On appeal from
High Court of Kenya at Mombasa
HCC COMM No. 73 of 2016
Jurisdiction invoked
First appeal to the Court of Appeal against an exercise of discretion in an interlocutory ruling of the High Court (Appeal from the ruling and order of the High Court of Kenya at Mombasa)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (2)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Kenya Power & Lighting Co Ltd v Abdulhakim Abdulla Mohamed & another [2017] KECA 527 (KLR)", Case Analysis (2017). Civil Appeal No. 115 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/527/eng@2017-05-11

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.